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San Beda College of Law 54

MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS

COMMERCIAL LAW COMMITTEE CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON: Jayson O’S Ramos EDP: Beatrix I. Ramos SUBJECT HEADS: Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transporta-tion Laws);Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gat-dula (Banking Laws); Robespierre CU (Law on Intellectual Property)



CONTRACT OF TRANSPORTATION/ CARRIAGE ☞ A contract whereby a person, natural or ju-ridical, obligates to transport persons, goods, or both, from one place to another, by land, air or water, for a price or compensation.☞ Classifications:

1. Common or Private2. Goods or Passengers3. For a fee (for hire) or Gratuitous4. Land, Water/maritime, or Air 5. Domestic/inter-island/coastwise or

International/foreign✍ It is a relationship which is imbued with the public interest.

COMMON CARRIER ☞ Persons, corporations, firms or associations engaged in the business of carrying or trans-porting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public (Art. 1732, Civil Code).✍ Art. 1732 of the New Civil Code avoids any distinction between one whose principal busi-ness activity is the carrying of persons or goods or both and one who does such carry-ing only as an ancillary activity (sideline). It also avoids a distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or un-scheduled basis.

Neither does the law distinguish between a carrier offering its services to the general public that is the general community or popu-lation and one who offers services or solicits business only from a narrow segment of the general population.

A person or entity is a common carrier even if he did not secure a Certificate of Pub-lic Convenience (De Guzman vs. CA, 168 SCRA 612).✍ It makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transporta-tion should be by motor vehicle. (First Philip-pine Industrial Corporation vs. CA)✍ One is a common carrier even if he has no fixed and publicly known route, maintains no terminals, and issues no tickets (Asia Lighter-age Shipping, Inc. vs. CA).☞ Characteristics:

1. Undertakes to carry for all people indif-ferently and thus is liable for refusal without sufficient reason (Lastimoso vs. Doliente, October 20, 1961);

2. Cannot lawfully decline to accept a par-ticular class of goods for carriage to the prejudice of the traffic in these goods;

3. No monopoly is favored (Batangas Trans. vs. Orlanes, 52 PHIL 455);

4. Provides public convenience.

PRIVATE CARRIER ☞ One which, without being engaged in the business of carrying as a public employment, undertakes to deliver goods or passengers for compensation. (Home Insurance Co. vs. American Steamship Agency, 23 SCRA 24)

✍ TESTS WHETHER CARRIER IS COMMON OR PRIVATE:☞ The SC in First Philippine Industrial Corpo-ration vs. CA (1995) reiterated the following tests:

1. It must be engaged in the business of carrying goods for others as a public employment and must hold itself out as ready to engage in the transportation of goods generally as a business and not as a casual oc-cupation;

2. It must undertake to carry goods of the kind to which its business in confined;

3. It must undertake to carry by the method by which his business is conducted and over its established roads; and

4. The transportation must be for hire.✍ In National Steel Corp. vs. CA (1997) the SC held that the true test of a common carrier is the carriage of goods or passengers provided it has space for all who opt to avail them-selves of its transportation for a fee.

COMMON CARRIER PRIVATE CAR-RIER

1. As to availability

Holds himself out for all people indiscrimi-nately

Contracts with partic-ular individuals or groups only

2. As to required diligence

Extraordinary dili-gence is required

Ordinary diligence is required

3. As to regulation

Subject to State regu-lation

Not subject to State regulation

4. Stipulation limiting liability

Parties may not agree on limiting the car-rier’s liability except when provided by law

Parties may limit the carrier’s liability, pro-vided it is not con-trary to law, morals or good customs

5. Exempting circumstance

Prove extraordinary diligence and Art. 1733, NCC

caso fortuito, Art. 1174 NCC

6.Presumption of negligence

There is a presump-tion of fault or negli-gence

No presumption of fault or negligence

7.Governing law

Law on common carri-ers

Law on obligations and contracts




GOVERNING LAWSA. Domestic/inter-island/coastwise☞ Applicable to Land, Water, and Air trans-portation

1. Civil Code - primary2. Code of Commerce (Arts. 349, 379,

573-734, 580, 806-845) - suppletory

B. International/foreign/overseas (Foreign country to Philippines)☞ Applicable to Water/maritime and Air trans-portation✍ The law of the country of destination gener-ally applies.

1. Civil Code - primary2. Code of Commerce - suppletory3. Others - suppletory

a. Water/maritime: Carriage of Goods by Sea Act (COGSA)

b. Air: Warsaw Convention

I. NEW CIVIL CODE(Arts. 1732-1766)

REQUIREMENT OF EXTRAORDINARY DILI-GENCE ☞ Rendition of service with the greatest skill and utmost foresight. (Davao Stevedore Co. v. Fernandez)☞ Rationale:

1. From the nature of the business and for reasons of public policy (Art. 1733)

2. Relationship of trust3. Business is impressed with a spe-

cial public duty4. Possession of the goods5. Preciousness of human life

☞ A common carrier is not an absolute insurer of all risks of travel.

COVERAGE1. Vigilance over goods (Arts. 1734-1754); and2. Safety of passengers (Arts. 1755-1763).

PASSENGER☞ A person who has entered into a contract of carriage, express or implied, with the carrier. They are entitled to extraordinary diligence from the common carrier.✍ The following are not considered passen-gers, and are entitled to ordinary diligence only:

a. One who has not yet boarded any part of a vehicle regardless of whether or not he has purchased a ticket;

b. One who remains on a carrier for an unreasonable length of time after he has been afforded every safe op-portunity to alight;

c. One who has boarded by fraud, stealth, or deceit;

d. One who attempts to board a mov-ing vehicle, although he has a ticket, unless the attempt be with the knowledge and consent of the

carrier;e. One who has boarded a wrong vehi-

cle, has been properly informed of such fact, and on alighting, is in-jured by the carrier;

f. Invited guests and accommodation passengers. (Lara vs. Valencia)

g. One who rides any part of the vehi-cle which is unsuitable or danger-ous or which he knows is not de-signed or intended for passengers.

DEFENSES OF A COMMON CARRIER IN THE CARRIAGE OF GOODS1. CASO FORTUITO/FORCE MAJEURE☞ Requisites:

a. Must be the proximate and only cause of the loss

b. Exercise of due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster (Art. 1739)

c. Carrier has not negligently incurred in delay in transporting the goods (Art. 1740)

✍ Fire is not considered a natural disaster or calamity as it arises almost invariably from some act of man. (Eastern Shipping Lines Inc. vs. IAC)✍ Mechanical defects are not force majeure if the same was discoverable by regular and ad-equate inspections. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.120-122)

2. ACTS OF PUBLIC ENEMY☞ Requisites:

a. Must be the proximate and only cause of the loss

b. Exercise of due diligence to prevent or minimize the loss before, during or after the act causing the loss, deteriora-tion or destruction of the goods (Art. 1739)

3. NEGLIGENCE OF THE SHIPPER OR OWNERa. Sole and proximate cause: absolute

defenseb. Contributory: partial defense. (Art.

1741)

4. CHARACTER OF THE GOODS OR DEFECTS IN THE PACKING OR IN THE CONTAINER☞ Even if the damage should be caused by the inherent defect/character of the goods, the common carrier must exercise due dili-gence to forestall or lessen the loss. (Art. 1742)☞ The carrier which, knowing the fact of im-proper packing of the goods upon ordinary observation, still accepts the goods notwith-standing such condition, is not relieved of lia-bility or loss or injury resulting therefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258)

5. ORDER OR ACT OF PUBLIC AUTHORITY☞ Said public authority must have the power to issue the order (Art. 1743). Consequently, where the officer acts without legal process,




the common carrier will be held liable. (Gan-zon v. CA 161 SCRA 646) ✍ Diligence in the selection and supervision of employees under Article 2180 of the Civil Code cannot be interposed as a defense by the common carrier because the liability of the carriers arises from the breach of the con-tract of carriage. The defense under said arti-cles is applicable to negligence in quasi-delicts under Art. 2176. (Del Prado v. Manila Electric Co., 52 Phil 900)

LIABILITY OF A COMMON CARRIER FORDEATH OR INJURIES TO PASSENGERS DUE TO ACTS OF ITS EMPLOYEES AND OTHER PASSENGERS OR STRANGERS

FOR ACTS OF ITS EM-PLOYEES

FOR ACTS OF OTHER PASSENGERS OR

STRANGERS

Required diligence and defense

Extraordinary dili-gence

Ordinary diligence

Nature of liability

Tort; however,The employee must be on duty at the time of the act. (Maranan v. Perez)

Not absolute; limited by Art. 1763

✍ The carrier is liable when its personnel al-lowed a passenger to drive the vehicle caus-ing it to collide with another vehicle resulting to the injuries suffered by the other passen-gers. (MRR vs. Ballesteros, 16 SCRA 641)

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

Parties

1. Common carrier2. Shipper3. Consignee

1. Common carrier2. Passenger

Cause of liability

Delay in delivery, loss, destruction, or deteriora-tion of the goods

Death or injury to the passengers

Duration of liability

From the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are de-livered actually or constructively by the carrier to the consignee or to the person who has the right to receive them. (Art. 1736)☞ It remains in full force and effect even when they are temporarily unloaded or stored in tran-sit unless the shipper or owner has made use of the right of stoppage in transitu. (Art. 1737) ☞ It continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination until the con-signee has bee advised of the arrival of the goods and has had reasonable opportunity there-after to remove them or otherwise dispose of them. (Art. 1738)✍ Delivery of goods to the custom authorities is not delivery to the consignee. (Lu Do v. Bi-namira, 101 Phil 120)

The duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip, but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage. (LRTA v. Navidad, [2003]) ☞ All persons who remain on the premises within a reasonable time after leaving the con-veyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his de-parture. (La Mallorca v. CA, 17 SCRA 739 ; Abio-tiz Shipping Corporation v. CA, 179 SCRA 95)☞ It is the duty of common carriers of passen-gers to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to enter, and they are liable for in-juries suffered from the sudden starting up or jerking of their conveyances while doing so. The duty which the carrier of passengers owes to its patrons extends to persons boarding the cars as well as to those alighting therefrom (Dangwa Trans Co., Inc. vs. CA 202 SCRA 574).

Presumption of negligence




Art.1735 Civil CodeReason: As to when and how goods were dam-aged in transit is a matter peculiarly within the knowledge of the carrier and its employees. (Mi-rasol v. Dollar, 53 PHIL 124)

Mere proof of delivery of goods to a carrier in good order and the subsequent arrival of the same goods at the place of destination in bad or-der makes for a prima facie case against the car-rier. (Coastwise Lighterage Corp. v. CA, 245 SCRA 796)

Art.1755 Civil CodeReason: The contract between the passenger and the carrier imposes on the latter the duty to transport the passenger safely; hence the bur-den of explaining should fall on the carrier.

Defenses

1. Ordinary circumstance: Exercise of ex-traordinary diligence (Art. 1735)

2. Special circumstances:a. Flood, storm, earthquake, lighting,

or other natural disaster or calamity (plus force majeure)

b. Act of the public enemy in war, whether international or civil

c. Act or omission of the shipper or the owner of goods

d. The character of the goods or de-fects in the packing or in the con-tainers

e. Order or act of competent public authority (Art. 1734)

1. Exercise of extraordinary diligence (Art. 1756)

2. Caso fortuito

Valid stipulations

1. Reduction of degree of diligence to ordinary diligence, provided it be:

a) In writing, signed by the shipper or owner;

b) Supported by a valuable consideration other than the service rendered by the carriers; and

c) Reasonable, just and not contrary to public policy. (Art. 1744)

2. Fixed amount of liability: A contract fixing the sum to be recovered by the owner or shipper for the loss, destruction or deterioration of the goods, if it is reasonable and just under the cir-cumstances and has been fairly and freely agreed upon. (Art. 1750)3. Limited liability for delay: An agreement limit-ing the common carrier’s liability for delay on ac-count of strikes or riots (Art. 1748)4. Stipulation limiting liability to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value. (Art. 1749)

✍ The diligence required in the carriage of the goods may be reduced by only one degree, from extraordinary to ordinary diligence or diligence of a good father of a family. (Art. 1744, Art. 1745, no. 4)

Stipulation limiting liability when a passenger is carried gratuitously, but not for willful acts or gross negligence. (Art. 1758)

Void stipulations

1. That the goods are transported at the risk of the owner or shipper;

Dispensing with or lessening the extraordinary responsibility of a common carrier for the safety




2. That carrier will not be liable for any loss, destruction or deterioration of the goods;

3. That the carrier need not observe any dili-gence in the custody of the goods;

4. That the carrier shall exercise a degree of diligence less than that of a good father of a family over the movable transported;

5. That the carrier shall not be responsible for the acts or omissions of his or its employ-ees;

6. That the carrier’s liability for acts commit-ted by thieves or robbers who do not act with grave or irresistible threat, violence or force is dispensed with or diminished;

7. That the carrier is not responsible for the loss, destruction or deterioration of the goods on account of the defective condition of the car, vehicle, ship or other equipment used in the contract of carriage. (Art. 1745)

of passengers imposed by law by stipulation, by posting of notices, by statements on tickets or otherwise. (Art. 1757)



MEMORY AID IN COMMERCIAL LAWRULES ON PASSENGERS’ BAGGAGE

IN THE CUSTODY OF THE PASSENGERS (HAND-CARRIED)

IN THE CUSTODY OF THE COMMON CAR-

RIER(CHECKED-IN)

Legal nature of the baggage

Necessary deposit Considered as “goods”

Required diligence by the common carrier

Diligence of a deposi-tary (ordinary dili-gence)

Extraordinary dili-gence

Applicable rules

Arts. 1998 and 2000-2003

Arts. 1733-1753

CONCURRING CAUSES OF ACTION ARISING FROM THE NEGLIGENT ACT OF THE COMMON CARRIER1. Culpa contractual (breach of contract)☞ Only the carrier is primarily liable and not the driver, because there is no privity be-tween the driver and the passenger. ☞ Basis: Art.1759, NCC.☞ No defense of due diligence in the selection and supervision of employees.

2. Culpa aquiliana (quasi-delict)☞ The carrier and driver are solidarily liable as joint tortfeasors. ☞ Basis: Art. 2180, NCC.☞ Defense of due diligence in the selection and supervision of employees is available. Ex-ception: maritime tort resulting in collision. (See notes on Collision)

3. Culpa criminal (criminal negligence)☞ The driver is primarily liable. The carrier is subsidiarily liable only if the driver is con-victed and declared insolvent. ☞ Basis: Art. 100, RPC.

✍ In case of injury to a passenger due to the negligence of the driver of the bus on which he is riding and of the driver of another vehi-cle, the drivers as well as the owners of the two vehicles are jointly and severally liable for damages. It makes no difference that the liability of the bus driver and owner springs from contract while that of the owner and driver of the other vehicle arises from quasi-delict. (Fabre vs. CA)

LIMITATIONS AS TO CARRIER’S LIABILITY

INVALID AS BEING CONTRARY TO PUBLIC

POLICY

VALID & ENFORCE-ABLE

1. One exempting the carrier from any and all liability for loss or dam-age occasioned by its own negligence.2. An unqualified limi-tation of liability to an agreed valuation.

1. One limiting the li-ability of the carrier to an agreed valua-tion, unless the ship-per declares a higher value and pays a higher rate of freight(H.E. Heacock Com-pany vs. Macondray & Company Inc.)

☞ However, the carrier cannot limit its liability for injury to, or loss of, goods shipped where such injury or loss was caused by its own neg-ligence. (Shewaram vs. PAL, 17 SCRA 606)

SPECIAL RULES ON LIABILITES OF AIRLINE CARRIERS1. In case of flight diversion due to bad weather or other circumstances beyond the pilot’s control, the relation between the car-rier and the passenger continues until the lat-ter has been landed at the port of destination and has left the carrier’s premises. The car-rier should necessarily exercise extraordinary diligence in safeguarding the comfort, conve-nience and safety of its stranded passengers until they have reached their final destina-tion. (Philippine Airlines vs. CA, 226 SCRA 423)2. Even where overbooking of passengers is allowed as a commercial practice, the airline company would still be guilty of bad faith and still be liable for damages if it did not properly inform passenger that it could breach the contract of carriage even if they were con-firmed passengers. (Zalamea vs. CA, 228 SCRA 23)3. An open-dated ticket constitutes a com-plete contract between the carrier and pas-senger. Hence, the airline company is liable if it refused to confirm a passenger’s flight reservation. (Singson vs. CA, 282 SCRA 149)4. An airline company which issued a con-firmed ticket to a passenger covering succes-sive trips on different airlines can be held li-able for damages occasioned by “bumping off” by one of the successive airlines. (Lufthansa German Airlines vs. CA, 238 SCRA 290)5. An airline ticket providing that carriage by successive air carriers is to be regarded as a “single operation” is to make the issuing car-rier liable for the tortuous conduct of the other carrier. A printed provision in the ticket limiting liability only to its own conduct is not enough to rebut that liability. (KLM Royal Dutch Airlines vs. CA, 65 SCRA 237)

II. CODE OF COMMERCE

A. OVERLAND TRANSPORTATION(Arts. 349-379)

Applicability1. Domestic land and water/maritime trans-portation. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)




2. Domestic Air Transportation. (Commercial Law Review, Cesar Villanueva, 2004 ed.) IMPORTANT CONCEPTS:

1. Bill of lading2. Obligations of the carrier3. Right of abandonment4. Notice of damage5. Combined carrier agreement

BILL OF LADING ☞ The written acknowledgment of receipt of goods and agreement to transport them to a specific place to a person named or to his or-der. ☞ Rules: 1. It is not indispensable for the creation of a contract of carriage. (Compania Maritima vs. Insurance Company of North America, 12 SCRA 213)

2. Ambiguity is construed against the carrier, the contract being one of adhesion.

3. The consignee, although the instrument is oftentimes drawn up only by the consignor and carrier, becomes bound by all the stipula-tions contained therein by making a claim for loss on the basis of said bill of lading. (Sea-Land Services Inc. vs. IAC)

4. The right of a party to recover for loss of shipment consigned to him under a bill of lad-ing drawn up only by and between the ship-per and the carrier, springs from either a rela-tion of agency between him and the shipper, or his status as stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto when he demands fulfillment of that stipulation. (Art. 1311 (2), (Mendoza vs. PAL Inc.)

5. Acceptance of the bill of lading without dissent raises the presumption that all the terms therein where brought to the knowl-edge of the shipper and agreed to by him and, in the absence of fraud or mistake; he is estopped from thereafter denying that he as-sented to such terms. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.261)

☞ Kinds:1. On board - issued when the goods

have been actually placed aboard the ship with very reasonable expectation that the shipment is as good as on its way.

2. Received - one in which it is stated that the goods have been received for shipment with or without specifying the vessel by which the goods are to be shipped.

3. Negotiable - one in which it is stated that the goods referred to therein will be delivered to the bearer or to the order of any person named therein.

4. Non-negotiable - One in which it is stated that the goods referred to therein will be delivered to a specified

person. 5. Clean – One which does not indicate

any defect in the goods. 6. Foul – One which contains a notation

thereon indicating that the goods cov-ered by it are in bad condition.

7. Spent – One which covers goods that already have been delivered by the carrier without a surrender of a signed copy of the bill.

8. Through – One issued by the carrier who is obliged to use the facilities of other carriers as well as his own facili-ties for the purpose of transporting the goods from the city of the seller to the city of the buyer, which bill of lad-ing is honored by the second and other interested carriers who do not issue their own bills.

9. Custody – One wherein the goods are already received by the carrier but the vessel indicated therein has not yet arrived in the port.

10. Port – One which is issued by the car-rier to whom the goods have been de-livered, and the vessel indicated in the bill of lading by which the goods are to be shipped is already in the port where the goods are held for shipment.

☞ Functions:1. Best evidence of the existence of the

contract of carriage of cargo (Art. 353)

2. Document of title3. Receipt of cargo 4. Contract to transport and deliver

goods as stipulated5. Symbol of the goods

OBLIGATIONS OF THE CARRIERA. Duty to accept the goods☑GENERAL RULE: A common carrier cannot ordinarily refuse to carry a particular class of goods.☑EXCEPTION: For some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. (Fisher vs. Yangco Steamship Co. 31 Phil 1). ✍ Instances when the carrier may validly refuse to accept the goods include the ff: 1.) Goods sought to be transported are dan-gerous objects, or substances including dyna-mite and other explosives2.) Goods are unfit for transportation3.) Acceptance would result in overloading4.) Contrabands or illegal goods5.) Goods are injurious to health6.) Goods will be exposed to untoward danger like flood, capture by enemies and the like7.) Goods like livestock will be exposed to dis-ease8.) Strike9.) Failure to tender goods on time. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.68)✍ In case of carriage by railway, the carrier is exempted from liability if carriage is insisted




upon by the shipper, provided its objections are stated in the bill of lading.✍ However, when a common carrier accepts cargo for shipment for valuable consideration, it takes the risk of delivering it in good condi-tion as when it was loaded. (PAL vs. CA)

B. Duty to deliver the goods ☞ Not only to transport the goods safely but to the person indicated in the bill of lading. The goods should be delivered to the con-signee or any other person to whom the bill of lading was validly transferred or negotiated.

Time of delivery

Stipulated in Contract/Bill of Lading

No stipulation

1. Carrier is bound to fulfill the contract and is liable for any delay; no matter from what cause it may have arisen.

1. Within a reasonable time. 2. Carrier is bound to forward them in the 1st shipment of the same or similar goods which he may make to the point of deliv-ery. (ART. 358 Code of Commerce)

Effects of delaya. Merely suspends and generally does not

terminate the contract of carriage b. Carrier remains duty bound to exercise

extraordinary diligencec. Natural disaster shall not free the car-

rier from responsibility (Art.1740)d. If delay is without just cause, the con-

tract limiting the common carrier’s lia-bility cannot be availed of in case of loss or deterioration of the goods (Art.1747)

RIGHT OF CONSIGNEE TO ABANDON GOODS☞ Instances:1. Partial non-delivery, where the goods

are useless without the others (Art. 363);

2. Goods are rendered useless for sale or consumption for the purposes for which they are properly destined (Art. 365); and

3. In case of delay through the fault of the carrier (Art. 371).

NOTICE OF DAMAGE (ART. 366)☞ Requisites for applicability:1. Domestic/inter-island/coastwise trans-

portation2. Land/water/air transportation3. Carriage of goods4. Goods shipped are damaged☞ Rules:a. Patent damage: shipper must file a claim

against the carrier immediately upon de-livery (it may be oral or written)

b. Latent damage: shipper should file a claim against the carrier within 24 hours from delivery.

Note: These rules does not apply to misdeliv-

ery of goods. (Roldan vs. Lim Ponzo)☞Purpose of notice: To inform the carrier that the shipment has been damaged, and it is charged with liability therefore, and to give it an opportunity to make an investigation and fix responsibility while the matter is fresh. ☞ The filing of notice of claim is a condition precedent for recovery. ✍ Shorter period may be stipulated by the parties because it merely affects the ship-per’s remedy and does not affect the liability of the carrier. (PHILAMGEN vs. Sweetlines, Inc.) Prescriptive Period☞ Not provided by Article 366. Thus, in such absence, Civil Code rules on prescription ap-ply.☞ If despite the notice of claim, the carrier re-fuses to pay, action must be filed in court.

1. No bill of lading was is-sued: within 6 years

2. Bill of lading was issued: within 10 years.

ARTICLE 366 COGSA Sec.3 (6)

Applicability

1. Domestic/inter-is-land/coastwise transportation

2. Land, water, air transportation

3. Carriage of goods

1. International/overseas/foreign (from foreign country to Phils.)Note: subject to the rule on Paramount Clause2. Water/maritime transportation3. Carriage of goods

Notice of damage

1. Condition prece-dent

2. 24-hour period for claiming latent damage

1. Not a condition precedent

2. 3-day period for claiming latent damage

Prescriptive period

None provided; Civil Code applies.

One year from the date of delivery (de-livered but damaged goods), or date when the vessel left port or from the date of de-livery to the arrastre (non-delivery or loss).

0.

COMBINED CARRIER AGREEMENT (ART. 373)☑GENERAL RULE: In case of a contract of transportation of several legs, each carrier is responsible for its particular leg in the con-tract.☑EXCEPTION: A combined carrier agreement where a carrier makes itself liable assuming the obligations and acquiring as well the rights and causes of action of those which preceded it.




B. MARITIME COMMERCE(Arts. 573-869)

IMPORTANT CONCEPTS:1. Merchant vessel2. Maritime lien and Preference of

Credit3. Doctrine of limited liability4. Causes of revocation of voyage5. Participants in maritime commerce6. Charter party7. Loans on bottomry and responden-

tia8. Accidents in maritime commerce

MARITIME/ADMIRALTY LAW☞ It is the system of laws which particularly relates to the affairs and business of the sea, to ships, their crews and navigation, and to maritime conveyance of persons and prop-erty. (Notes and Cases on the Law on Trans-portation and Public Utilities, Aquino & Her-nando, citing Francisco, p.254)

✍ Maritime laws apply only to maritime trade and sea voyages. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)

✍ Arrastre service is not maritime in charac-ter. It refers to a contract for the unloading of goods from a vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA 244)

CHARACTERISTICS OF MARITIME TRANSAC-TION1. Real - similar to transactions over real property with respect to effectivity against third persons which is done through registra-tion. (Rubiso vs. Rivera, 37 Phil. 72). The evi-dence of real nature is shown by: 1) the limi-tation of the liability of the agents to the ac-tual value of the vessel and the freight money; and 2) the right to retain the cargo and embargo and detention of the vessel (Lu-zon Stevedoring Corp v. CA, 156 SCRA 169);2. Hypothecary - the liability of the owner of the value of the vessel is limited to the vessel itself (Doctrine of Limited Liability).

✍ The real and hypothecary nature of mar-itime law simply means that the liability of the carrier in connection with losses related to maritime contracts is confined to the ves-sel, which stands as the guaranty for their settlement. (Aboitiz Shipping Corp. vs. Gen-eral Accident Fire and Life Assurance Corp. 217 SCRA 359).

MERCHANT VESSEL☞ Vessel engaged in maritime commerce, whether foreign or otherwise. (Bar Review Materials in Commercial Law, Jorge Miravite, 2002 ed.)☞ Constitutes property which may be ac-quired and transferred by any of the means recognized by law. They shall continue to be considered as personal property. (Arts. 573, 585)

☞ They are susceptible to maritime liens such as for the repair, equipping and provisioning of the vessel in the preparation of a voyage, as well as mortgage liabilities, in satisfaction of which a vessel may be validly arrested and sold. (Ship Mortgage Decree of 1978)

MARITIME LIEN☞ It constitutes a present right of property in the ship, a jus in re, to be afterward enforced in admiralty by process in rem. (PNB vs. CA, 337 SCRA 381)☞ If the maritime lien arose prior to the recording of a preferred mortgage, it shall have priority over the said mortgage lien. (PNB vs. CA, 337 SCRA 381)

ORDER OF PREFERENCE IN CASE OF SALE OF VESSEL

R.A. 6106 P.D. 1521

Effectivity date

1969 1978

Applicability

Overseas shipping only

Both domestic and overseas shipping

Kind of sale

Judicial Judicial and extraju-dicial

Order of Preference

A preferred mortgage shall have priority over all claims against the vessel, except the following preferences in the or-der stated:1. Judicial costs of the proceedings;2. Taxes due the Philippine Govern-ment;3. Salaries and wages of the Captain and Crew of the ves-sel during its last voyage;4. General average or salvage including contract salvage, bottomry loans, and indemnity due ship-pers for the value of goods transported but which were not delivered to the con-signee;5. Costs of repair and equipment of the vessel, and provision-ing of food, supplies

The preferred mort-gage lien shall have priority over all claims against the vessel, except the following preferences in the order stated:1. Expenses and fees allowed and costs taxed by the court and taxes due to the Government;2. Crew’s wages;3. General average;4. Salvage, including contract salvage;5. Maritime liens arising prior in time to the recording of the preferred mort-gage;6. Damages arising out of tort; and7. Preferred mort-gage registered prior in time.




and fuel during its last voyage; and6. Preferred mort-gages registered prior in time.

✍ Effect of sale: All pre-existing claims in the vessel are terminated. They will then be satis-fied from the proceeds of the sale subject to the order of preference.

DOCTRINE OF LIMITED LIABILITY (HYPOTHECARY RULE)☞ Cases where applicable:

1. Art. 587 – civil liability for indemni-ties to third persons

2. Art. 590 – indemnities from negli-gent acts of the captain (not the shipowner or ship agent)

3. Art. 837 – collision4. Art. 643 – liability for wages of the

captain and the crew and for ad-vances made by the ship agent if the vessel is lost by shipwreck or capture

☑GENERAL RULE: The liability of shipowner and ship agent is limited to the amount of in-terest in said vessel such that where vessel is entirely lost, the obligation is extinguished. (Luzon Stevedoring v. Escano, 156 SCRA 169) The interest extends to: 1) the vessel itself; 2) equipments; 3) freightage; and 4) insurance proceeds. (Chua v. IAC, 166 SCRA 183)☑EXCEPTIONS: 1. Claims under Workmen’s Compensation

(Abueg vs. San Diego 77 Phil 730);2. I njury or damage due to shipowner or to

the concurring negligence of the shipowner and the captain;

3. The vessel is insured (Vasquez vs. CA 138 SCRA 553).

4. Expenses for repair on vessel completed before loss;

5. In case there is no total loss and the vessel is not abandoned;

6. Collision between two negligent vessels;

✍ Abandonment of the vessel is necessary to limit the liability of the shipowner. The only instance were abandonment is dispensed with is when the vessel is entirely lost (Luzon Stevedoring vs. CA 156 SCRA 169).

RIGHT OF SHIPOWNER OR SHIP AGENT TO ABANDON VESSEL☞ Instances:1. In case of civil liability from indemnities to

third persons (Art. 587);2. In case of leakage of at least ¾ of the con-

tents of a cargo containing liquids (Art. 687); and

3. In case of constructive loss of the vessel (Sec. 138, Insurance Code).

RIGHT OF ABANDONMENT

SHIPOWNER OR SHIP AGENT

CONSIGNEE

What may be abandoned

Vessel Goods shipped

Instances

1. In case of civil liabil-ity from indemnities to third persons (Art. 587);2. Sec. 138, Insurance Code;3. In case of leakage of at least ¾ of the contents of a cargo containing liquids (Art. 687)

1. Partial non-deliv-ery, where the goods are useless without the others (Art. 363);2. Goods are ren-dered useless for sale or consumption for the purposes for which they are prop-erly destined (Art. 365); and3. In case of delay through the fault of the carrier (Art. 371).

Effects

1. Transfer of owner-ship of the vessel from the shipowner to the shippers or insurer.

2. In case of (2), the insurer must pay the insured as if there was actual to-tal loss of the ves-sel.

1. Transfer of own-ership on the goods from the shipper to the carrier.

2. Carrier should pay the shipper the market value of the goods at the point of des-tination.

CAUSES OF REVOCATION OF VOYAGE1. War or interdiction of commerce;2. Blockade;3. Prohibition to receive cargo at destina-

tion;4. Embargo;5. Inability of the vessel to navigate. (Art.

640)

Terms:1. Interdiction of commerce – A govern-

mental prohibition of commercial inter-course intended to bring about an entire cessation for the time being of all trade whatever.

2. Blockade – A sort of circumvallation of a place by which all foreign connection and correspondence is, as far as human power can effect it, to be cut off.

3. Embargo – A proclamation or order of a state, usually issued in time of war or threatened hostilities, prohibiting the departure of ships or goods from some or all the ports of such state until further order.

PARTICIPANTS IN MARITIME COMMERCEA. Shipowners and ship agentsB. Captains and masters of the vessel




C. Officers and crew of the vesselD. SupercargoesE. Pilot

A. SHIPOWNERS AND SHIP AGENTS Shipowner (proprietario)☞ Person who has possession, control and management of the vessel and the conse-quent right to direct her navigation and re-ceive freight earned and paid, while his pos-session continues.

Ship agent (naviero)☞ Person entrusted with provisioning and rep-resenting the vessel in the port in which it may be found; also includes the shipowner.☞ Not a mere agent under civil law; he is soli-darily liable with the ship owner. ☞ Powers and functions:1. Capacity to trade;2. Discharge duties of the captain, subject

to Art.609;3. Contract in the name of the owners with

respect to repairs, details of equipment, armament, provisions of food and fuel, and freight of the vessel, and all that re-late to the requirements of navigation;

4. Order a new voyage, make a new char-ter or insure the vessel after obtaining authorization from the shipowner or if granted in certificate of appointment.

Civil Liabilities of the Shipowner And Ship Agent1. All contracts of the captain, whether au-

thorized or not, to repair, equip and pro-vision the vessel; (Art. 586)

2. Loss and damage to the goods loaded on the vessel without prejudice to their right to free themselves from liability by abandoning the vessel to the creditors. (Art. 587)

Duty of Ship Agent to Discharge the Captain and Members of the Crew☞ If the seamen contract is not for a definite period or voyage, he may discharge them at his discretion. (Art. 603)☞ If for a definite period, he may not dis-charge them until after the fulfillment of their contracts, except on the following grounds:

a. Insubordination in serious matters;b. Robbery;c. Theft;d. Habitual drunkenness;e. Damage caused to the vessel or to its cargo through malice or manifest or proven negligence. (Art. 605)

B. CAPTAINS AND MASTERS☞ They are the chiefs or commanders of ships.☞ The terms have the same meaning, but are particularly used in accordance with the size of the vessel governed and the scope of transportation, i.e., large and overseas, and small and coastwise, respectively. ☞ Nature of position (3-fold character):

1. General agent of the shipowner;2. Technical director of the vessel;

3. Representative of the government of the country under whose flag he navigates.

☞ Qualifications:1. Filipino citizen;2. Legal capacity to contract;3. Must have passed the required

physical and mental examinations required for licensing him as such. (Art. 609)

☞ Inherent powers:1. Appoint crew in the absence of ship

agent;2. Command the crew and direct the

vessel to its port of destination; 3. Impose correctional punishment on

those who, while on board vessel, fail to comply with his orders or are wanting in discipline;

4. Make contracts for the charter of vessel in the absence of ship agent.

5. Supply, equip, and provision the vessel; and

6. Order repair of vessel to enable it to continue its voyage. (Art. 610)

☞ Sources of funds to comply with the inher-ent powers of the captain (in successive or-der):

1. From the consignee of the vessel;2. From the consignee of the cargo;3. By drawing on the ship agent;4. By a loan on bottomry;5. By sale of part of the cargo. (Art.

611)☞ Duties:

1. Bring on board the proper certifi-cate and documents and a copy of the Code of Commerce;

2. Keep a Log Book, Accounting Book and Freight Book;

3. Examine the ship before the voy-age;

4. Stay on board during the loading and unloading of the cargo;

5. Be on deck while leaving or enter-ing the port;

6. Protest arrivals under stress and in case of shipwreck;

7. Follow instructions of and render an accounting to the ship agent;

8. Leave the vessel last in case of wreck;

9. Hold in custody properties left by deceased passengers and crew members;

10. Comply with the requirements of customs, health, etc. at the port of arrival;

11. Observe rules to avoid collision;12. Demand a pilot while entering or

leaving a port. (Art. 612)

✍ A ship’s captain must be accorded a rea-sonable measure of discretionary authority to decide what the safety of the ship and of its crew and cargo specifically requires on a stip-ulated ocean voyage (Inter-Orient Maritime Enterprises Inc. vs. CA).

☞ No liability for the following:




1. Damages caused to the vessel or to the cargo by force majeure;

2. Obligations contracted for the re-pair, equipment, and provisioning of the vessel unless he has ex-pressly bound himself personally or has signed a bill of exchange or promissory note in his name. (Art. 620)

Solidary Liabilities of the Ship Agent/Shipowner for Acts Done by the Captain to-wards Passengers and Cargoes

1. Damages to vessel and to cargo due to lack of skill and negligence;

2. Thefts and robberies of the crew;3. Losses and fines for violation of

laws;4. Damages due to mutinies;5. Damages due to misuse of power;6. For deviations;7. For arrivals under stress;8. Damages due to non-observance of

marine regulations. (Art. 618)

C. OFFICERS AND CREW1. Sailing Mate/First Mate2. Second Mate3. Engineers4. Crew☞ No liability under the following circum-stances:1. If, before beginning voyage, captain at-

tempts to change it, or a naval war with the power to which the vessel was des-tined occurs;

2. If a disease breaks out and be officially declared an epidemic in the port of des-tination;

3. If the vessel should change owner or captain. (Art. 647)

Sailing Mate/First Mate ☞ Second chief of the vessel who takes the place of the captain in case of absence, sick-ness, or death and shall assume all of his du-ties, powers and responsibilities. (Art. 627)☞ Duties:

1. Provide himself with maps and charts with astronomical tables necessary for the discharge of his duties;

2. Keep the Binnacle Book;3. Change the course of the voyage

on consultation with the captain and the officers of the boat, follow-ing the decision of the captain in case of disagreement;

4. Responsible for all the damages caused to the vessel and the cargo by reason of his negligence. (Arts. 628 - 631)

Second Mate☞ Takes command of the vessel in case of the inability or disqualification of the captain and the sailing mate, assuming in such case their powers and responsibilities.☞ Third in command☞ Duties:

1. Preserve the hull and rigging of the vessel;

2. Arrange well the cargo;3. Discipline the crew;4. Assign work to crew members;5. Inventory the rigging and equip-

ment of the vessel, if laid up. (Art. 632)

Engineers☞ Officers of the vessel but have no authority except in matters referring to the motor ap-paratus. When two or more are hired, one of them shall be the chief engineer.☞ Duties:

1. In charge of the motor apparatus, spare parts, and other instruments pertaining to the engines;

2. Keep the engines and boilers in good condition;

3. Not to change or repair the engine without authority of the captain;

4. Inform the captain of any damage to the motor apparatus;

5. Keep an Engine Book;6. Supervise all personnel maintaining

the engine. (Art. 632)

Crew☞ The aggregate of seamen who man a ship, or the ship’s company.☞ Hired by the ship agent, where he is present and in his absence, the captain hires them, preferring Filipinos, and in their ab-sence, he may take in foreigners, but not ex-ceeding 1/5 of the crew. (Art. 634)

Classes of Seaman’s Contracts1. By the voyage;2. By the month; and3. By share of profits or freightage.

Just Causes for the Discharge of Seaman While Contract Subsists1. Perpetration of a crime;2. Repeated insubordination, want of disci-

pline;3. Repeated incapacity and negligence;4. Habitual drunkenness;5. Physical incapacity;6. Desertion. (Art. 637)

Rules in case of Death of a Seaman☞ The seaman’s heirs are entitled to payment as follows:1. If death is natural:

a. compensation up to time of death if engaged on wage

b. if by voyage - half of amount if death occurs on voyage out; and full, if on voyage in

c. if by shares - none, if before depar-ture; full, if after departure

2. if death is due to defense of vessel - full payment;

3. if captured in defense of vessel - full payment;

4. if captured due to carelessness - wages up to the date of the capture. (Art. 645)




Complement of the Vessel☞ All persons on board, from the captain to the cabin boy, necessary for the manage-ment, maneuvers, and service, thus including the crew, the sailing mates, engineers, stok-ers and other employees on board not having specific designations.☞ Does not include the passengers or the persons whom the vessel is transporting.

D. SUPERCARGOES☞ Persons who discharges administrative du-ties assigned to him by ship agent or ship-pers, keeping an account and record of trans-action as required in the accounting book of the captain. (Art. 649)

E. PILOT☞ A person duly qualified, and licensed, to conduct a vessel into or out of ports, or in cer-tain waters.☞ The term generally connotes a person taken on board at a particular place for the purpose of conducting a ship through a river, road or channel, or from a port.☞ Master pro hac vice for the time being in the command and navigation of the ship.☞ While in exercising his functions a pilot is in sole command of the ship and supersedes the master for the time being in the command and navigation of the ship, the master does not surrender his vessel to the pilot and the pilot is not the master. There are occasions when the master may and should interfere and even displace the pilot, as when the pilot is obviously incompetent or intoxicated (Far Eastern Shipping Company vs. CA).✍ Compulsory Pilotage – States possessing harbors have enacted laws or promulgated rules requiring vessels approaching their ports to take on board pilots licensed under the local laws. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p. 518)

Liablity of Pilot☑GENERAL RULE: On compulsory pilotage grounds, the Harbor Pilot is responsible for damage to a vessel or to life or property due to his negligence.☑EXCEPT: 1. Accident caused by force majeure or natu-ral calamity provided the pilot exercised pru-dence and extra diligence to prevent or mini-mize damages. 2. Countermand or overrule by the master of the vessel in which case the registered owner of the vessel is liable. (Sec.11, Art.III PPA Ad-min Order 03-85)

SPECIAL CONTRACTS OF MARITIME COM-MERCE

1. Charter party2. Bill of lading3. Contract of transportation of pas-

sengers on sea voyages4. Loan on bottomry5. Loan on respondentia6. Marine insurance

CHARTER PARTY☞ A contract by virtue of which the owner or agent binds himself to transport merchandise or persons for a fixed price.☞ A contract by which an entire ship, or some principal part thereof is let/leased by the owner to another person for a specified time or use. (Planters Products, Inc. vs. CA, 226 SCRA 476)☞ Parties:

1. Ship owner or ship agent2. Charterer

☞ Classes: 1. Bareboat or demise – The charterer pro-vides crew, food and fuel. The charterer is li-able as if he were the owner, except when the cause arises from the unworthiness of the vessel. The shipowner leases to the charterer the whole vessel, transferring to the latter the entire command, possession and consequent control over the vessel’s navigation, including the master and the crew, who thereby be-come the charter’s servants. It transforms a common carrier into a private carrier.

✍ The charterer becomes the owner of the vessel pro hac vice, just for that one particular purpose only. Because the charterer is treated as owner pro hac vice, the charterer assumes the custom-ary rights and liabilities of the shipowner to third persons and is held liable for the expense of the voyage and the wages of the seamen.

2. Contract of Affreightment – A contract whereby the owner of the vessel leases part or all of its space to haul goods for others.

✍ The shipowner retains the possession, command and navigation of the ship, the charterer merely having use of the space in the vessel in return for his payment of the charter hired.☞ Kinds:a. Time charter – vessel is chartered

for a fixed period of time or dura-tion of voyage.

b. Voyage or trip charter – the vessel is leased for one or series of voy-ages usually for purposes of trans-porting goods for charterer.

LEASE CHARTER PARTY

If for a definite period, lessee cannot give up the lease by paying a portion of the amount agreed upon.

Charterer may rescind charter party by pay-ing half of the freigh-tage agreed upon.

If the leased property is sold to one who knows of the exis-tence of the lease, the new owner must re-spect the lease.

The new owner is not compelled to respect the charter party so long as he can load the vessel with his own cargo. (Art. 689)

Civil law concept Commercial law con-cept




CHARTER PARTY BILL OF LADING

An entire or complete contract.

More like a private re-ceipt which the cap-tain gives to accredit goods received from persons

Consensual contract Real contract

BAREBOAT OR DEMISE CHARTER

CONTRACT OF AF-FREIGHTMENT (TIME

OR VOYAGE CHARTER)

Charterer becomes li-able to others caused by its negligence

Owner remains liable as carrier and must answer for any breach of duty

Charterer regarded as owner pro hac vice for the voyage

Charterer is not re-garded as owner.

Owner of vessel relin-quishes possession, command and naviga-tion to charterer

The vessel owner re-tains possession, command and naviga-tion of the ship

Common carrier is converted to private carrier.

Common carrier is not converted to a private carrier.

PERSONS WHO MAY MAKE A CHARTER1. Owner or owners of the vessel, ei-

ther in whole or in majority part, who have legal control and posses-sion of the vessel

2. Charterer may subcharter entire vessel to 3rd person only if not pro-hibited in original charter. (Art.679)

3. Ship agent if authorized by the owner/s or given such power in the certificate of appointment. (Art.598)

4. Captain in the absence of the ship agent or consignee and only if he acts in accordance with the instruc-tions of the agent or owner and pro-tects the latter’s interests. (Art.609)

REQUISITES OF A VALID CHARTER PARTY1. Consent of the contracting parties2. Existing vessel which should be

placed at the disposition of the shipper

3. Freight4. Compliance with Art. 652 of the

Code of Commerce

Clauses Which May Be Included In a Charter Party

Jason clause Clause paramount or paramount clause

A stipulation in a charter party that in case of a maritime ac-cident for which the shipowner is not re-sponsible by law, con-tract or otherwise, the cargo shippers, con-signees or owners shall contribute with the shipowner in gen-eral average. (Pan-dect of Commercial Law and Jurispru-dence, Justice Jose Vi-tug, 1997 ed.)

A clause in a charter party providing that the COGSA shall ap-ply, even though the transportation is do-mestic, subject to the extent that any term of the bill of lading is repugnant to the COGSA or applicable law, then to the ex-tent thereof the provi-sion of the bill of lad-ing is void. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)

Rights and Obligations of Parties

SHIPOWNER OR SHIP AGENT

CHARTERER

1. If the vessel is chartered wholly, not to accept cargo from others;

2. To observe rep-resented capac-ity;

3. To unload cargo clandestinely placed

4. To substitute an-other vessel if load is less than 3/5 of capacity;

5. To leave the port if the char-terer does not bring the cargo within the lay days and extra lay days al-lowed;

6. To place in a vessel in a con-dition to navi-gate;

7. to bring cargo to nearest neutral port in case of war or blockade. (Arts. 669-678)

1. To pay the agreed charter price;

2. To pay freigh-tage on un-boarded cargo;

3. To pay losses to others for load-ing uncon-tracted cargo and illicit cargo;

4. To wait if the vessel needs re-pair;

5. To pay expenses for deviation. (Arts. 679-687)




Rescission of a Charter Party

At charterer’s request(Art 688)

At shipowner’s request(Art. 689)

Fortuitous causes

1. By abandoning the charter and paying half of the freigh-tage;2. Error in tonnage or flag;3. Failure to place the vessel at the charterer’s disposal;4. Return of the vessel due to pirates, enemies or bad weather;5. Arrival at a port for repairs.

1. If the extra lay days termi-nate without the cargo being placed alongside the vessel;2. Sale by the owner of the ves-sel before loading by the char-terer;

1. War or interdiction of commerce;2. Blockade;3. Prohibition to receive cargo;4. Embargo; and5. Inability of the vessel to navigate.

Terms:1. Primage - bonus to be paid to the cap-

tain after the successful voyage.2. Demurrage – the sum fixed in the char-

ter party as a remuneration to the owner of the ship for the detention of his vessel beyond the number of days allowed by the charter party for loading or unloading or for sailing.

3. Deadfreight – the amount paid by or re-coverable from a charterer of a ship for the portion of the ship’s capacity the latter contracted for but failed to oc-cupy.

4. Lay Days - days allowed to charter par-ties for loading and unloading the cargo.

5. Extra Lay Days – days which follow after the lay days have elapsed.

USUAL FORMS OF CONSUMMATING CON-TRACTS1. C.I.F. – cost, insurance and freight;2. F.O.B. - free on board;3. F.A.S. - free alongside ship; and4. C. & F. - cost and freight.

TRANSSHIPMENT OF GOODS☞ The act of taking cargo out of one ship and loading it in another, or the transfer of goods from the vessel stipulated in the contract of affreightment to another vessel before the place of destination named in the contract has been reached, or the transfer for further transportation from one ship or conveyance to another.✍ It is not dependent on the ownership of the transporting ships or in the change of carri-

ers, but rather on the fact of actual physical transfer of cargo from one vessel to another. ✍ If done without legal excuse, however com-petent and safe the vessel into which the transfer is made, is a violation of contract and infringement of right of shipper and subjects carrier to liability if freight is lost event by cause otherwise excepted. (Magellan Manu-facturing vs. CA, 201 SCRA 102)

LOAN ON BOTTOMRY AND RESPONDENTIA☞ A real, unilateral, aleatory contract, by virtue of which one person lends to another a certain amount of money or goods on things exposed to maritime risks, which amount, with its earnings, is to be returned if the things are safely transported, and which is lost if the latter are lost.

LOAN ON BOTTOMRY LOAN ON RESPON-DENTIA

Definition

Loan made by shipowner or ship agent guaranteed by vessel itself and re-payable upon arrival of vessel at destina-tion. (Art. 719)

Loan taken on secu-rity of the cargo laden on a vessel, and repayable upon safe arrival of cargo at destination. (Art. 719)

Who may contract

Shipowner or ship agent. Outside of the residence of the owners - the captain.

Only the owner of the cargo.

Common elements:1. Exposure of security to marine peril;2. Obligation of the debtor conditioned

only upon safe arrival of the security at the point of destination.

Forms:1. Public instrument2. Policy signed by the contracting

parties and the broker taking part therein

3. Private instrument (Art. 720)

Contents:1. Kind, name and registry of the vessel;2. Name, surname and domicile of the

captain;3. Names, surnames and domiciles of the

borrower and the lender;4. Amount of the loan and the premium

stipulated;5. Time for repayment;6. Goods pledged to secure repayment;7. Voyage during which the risk is run

(Art.721)




BOTTOMRY/ RESPON-DENTIA

ORDINARY LOAN (MUTUUM)

Not subject to Usury Law

Subject to Usury Law

Liability of the bor-rower is contingent on the safe arrival of the vessel or cargo at destination

Not subject to any contingency (abso-lute liability)

The last lender is a preferred creditor

The first lender is a preferred creditor

WHEN LOAN ON BOTTOMRY OR RESPONDEN-TIA REGARDED AS SIMPLE LOAN

1. Lender loaned an amount larger than the value of the object due to fraudulent means employed by the borrower. (ART.726)

2. Full amount of the loan is not used for the cargo or given on the goods if all of them could not have been loaded, the balance will be considered a simple loan. (ART.727)

3. If the effects on which the money is taken is not subjected to any risk. (ART.729)

Note: Under existing laws, the parties to a loan, whether ordinary or maritime, may agree on any rate of interest. (CB Circular 905)

MARINE INSURANCE LOAN ON BOT-TOMRY OR RE-SPONDENTIA

Indemnity is paid after the loss has occurred

Indemnity is paid in advance by way of a loan

In case of loss of the vessel due to a risk in-sured against, the obli-gation of the insurer be-comes absolute

In case of loss of the vessel due to a marine peril, the obligation of the borrower to pay is extin-guished

Consensual contract Real contract

Hypothecary Nature of Bottomry/ Responden-tia☑GENERAL RULE: The obligation of the bor-rower to pay the loan is extinguished if the goods given as security are absolutely lost by reason of an accident of the sea, during the voyage designated, and if it is proven that the goods were on board.☑EXCEPTIONS:

1. Loss due to inherent defect;2. Loss due to the barratry on the part of

the captain;3. Loss due to the fault or malice of the

borrower;4. The vessel was engaged in contraband;

and5. The cargo loaded on the vessel be dif-

ferent in from that agreed upon.

Concurrence of Marine Insurance and Loan on Bottomry/Respondentia

1. The insurable interest of the owner of a ship hypothecated by bottomry is only the excess of the value over the amount secured by bottomry. (Sec. 101, Insurance Code)

2. The value of what may be saved in case of shipwreck shall be divided between the lender and the insurer in proportion to the interest of each one. (Art. 735)

Note: If a vessel is hypothecated by bottomry only the excess is insurable, since a loan on bottomry partakes of the nature likewise of an insurance coverage to the extent of the loan accommodation. The same rule would apply to the hypothecation of the cargo by re-spondentia. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)

ACCIDENTS IN MARITIME COMMERCE1. Averages 2. Arrival Under Stress 3. Collision 4. Shipwreck

AVERAGE☞ An extraordinary or accidental expense in-curred during the voyage in order to preserve the cargo, vessel or both, and all damages or deterioration suffered by the vessel from de-parture to the port of destination, and to the cargo from the port of loading to the port of consignment. (Art. 806)✍ The person whose property has been saved must contribute to reimburse the damage caused or expense incurred if the situation constitutes general average.☞ Classes:

1. Particular or Simple Average2. Gross or General Average

✍ Where both vessel and cargo are saved, it is general average; where only the vessel or only the cargo is saved, it is particular aver-age.✍ Expenses incurred to refloat a vessel, which accidentally ran aground, in order to continue its voyage, do not constitute general average. Not only is there absence of a marine peril, common safety factor, and deliberateness. It is the safety of the property, and not the voy-age, which constitutes the true foundation of general average. (A. Magsaysay, Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)

PARTICULAR OR SIM- GROSS OR GENERAL




PLE

Definition

Damages or expenses caused to the vessel or cargo that did not inure to the common benefit, and borne by respective owners. (Art. 809)

Damages or ex-penses deliberately caused in order to save the vessel, its cargo or both from real and known risk. (Art. 811)

Requisites

1. common dan-ger;

2. deliberate sac-rifice;

3. success; 4. proper formali-

ties and legal steps.

Liability

The owner of the goods which gave rise to the expense or suf-fered the damage shall bear this aver-age. (Art. 810)

All the persons hav-ing an interest in the vessel and the cargo therein at the time of the occurrence of the average shall con-tribute to satisfy this average. (Art. 812) The insurers (Art.859) and lenders on bottomry and re-spondentia shall like-wise contribute. (Art.732).

Number of interests involved

Only one interest in-volved

Several interests in-volved

Share in the damage or expense

100% share In proportion to the value of the owner’s property saved

Right to recover

No reimbursement There may be reim-bursement

Kinds (not exclusive)

Art. 809 Art. 811

Procedure for recovery

1. Assembly and deliberation

2. Resolution of the captain

3. Entry of the reso-lution in the log-book

4. Detailed minutes5. Delivery of the

minutes to the maritime judicial authority of the first port, within 24 hours from ar-rival,

6. Ratification by captain under oath. (Arts. 813-814)

GOODS NOT COVERED BY GENERAL AVERAGE EVEN IF SACRIFICED

1. Goods carried on deck. (ART.855)2. Goods not recorded in the books or

records of the vessel. (ART.855 (2))3. Fuel for the vessel if there is more

than sufficient fuel for the voyage. (Rule IX, York-Antwerp Rule)

Jettison☞ Act of throwing cargo overboard in order to lighten the vessel.☞ Order of goods to be cast overboard:

1. Those which are on the deck, pre-ferring the heaviest one with the least utility and value;

2. Those which are below the upper deck, beginning with the one with greatest weight and smallest value. (Art. 815)

✍ Jettisoned goods are not res nullius nor deemed “abandoned” within the meaning of civil law so as to be the object of occupation by salvage. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)✍ In order that the jettisoned goods may be included in the gross or general average, the existence of the cargo on board should be proven by means of the bill of lading. (Art. 816)

York-Antwerp (Y-A) Rules on Determining Lia-bility for Averages With Regard To Deck Cargo1. Deck cargo is allowed only in domestic/

coastwise/inter-island shipping, and is prohibited in international/overseas/for-eign shipping.

2. If deck cargo is loaded with the consent of the shipper on overseas trade, it must always contribute to general aver-age, but should the same be jettisoned, it would not be entitled to reimburse-




ment because there is violation of the Y-A Rules.

3. If deck cargo is loaded with the consent of the shipper on coastwise shipping, it must always contribute to general aver-age and if jettisoned would be entitled to reimbursement.

✍ Reason: In domestic shipping, voyages are usually short and the seas are generally not rough. In overseas shipping, the vessel is ex-posed for many days to perils of the sea.

DOMESTIC INTERNATIONAL

Deck cargo is allowed Deck cargo is not al-lowed

With shipper’s consent

General average Particular average

Without shipper’s consent

Captain is liable Captain is liable

ARRIVAL UNDER STRESS (ARRIBADA)☞ The arrival of a vessel at the nearest and most convenient port instead of the port of destination, if during the voyage the vessel cannot continue the trip to the port of desti-nation.

When lawful When unlawful

The inability to continue voy-age is due to lack of provi-sions, well-founded fear of seizure, privateers, pirates, or accidents of the sea disabling it to navigate. (Art. 819)

1. Lack of provisions due to negligence to carry according to usage and customs;

2. Risk of enemy not well known or manifest

3. Defect of vessel due to improper repair; and

4. Malice, negligence, lack of foresight or skill of captain. (Art. 820)

✍ It is the duty of the captain to continue the voyage without delay after the cause of the arrival under stress has ceased failing in such duty renders him liable. However, in case the cause has been risk of enemies, there must first be an assembly before departure. (Art. 825)☞ Steps:

1. Captain should determine during the voyage if there is well founded fear of seizure, privateers and other valid grounds;

2. Captain shall assemble the officers and summon the persons interested in the cargo who may attend the meeting but without a right to vote;

3. The officers shall determine and agree if there is well-founded rea-son after examining the circum-stances. The captain shall have the deciding vote;

4. The agreement shall be drafted and the proper minutes shall be signed and entered in the log book;

5. Objections and protests shall like-wise be entered in the minutes.

COLLISION☞ Impact of two vessels both of which are moving.

Allision☞ Impact between a moving vessel and a sta-tionary one.

Nautical Rules to Determine Negligence 1. When two vessels are about to enter a

port, the farther one must allow the nearer to enter first; if they collide, the fault is presumed to be imputable to the one who arrived later, unless it can be proved that there was no fault on its part.

2. When two vessels meet, the smaller should give the right of way to the larger one.

3. A vessel leaving port should leave the way clear for another which may be en-tering the same port.

4. The vessel which leaves later is pre-sumed to have collided against one which has left earlier.

5. There is a presumption against the ves-sel which sets sail in the night.

6. There is a presumption against the ves-sel with spread sails which collides with another which is at anchor and cannot move, even when the crew of the latter has received word to lift anchor, when there was not sufficient time to do so or there was fear of a greater damage or other legitimate reason.

7. There is a presumption against an im-properly moored vessel.

8. There is a presumption against a vessel which has no buoys to indicate the loca-tion of its anchors to prevent damage to vessels which may approach it.

9. Vessels must have “proper look-outs” or persons trained as such and who have




no other duty aside therefrom. (Smith Bell v. CA)

Nautical Rules as to Sailing Vessel and Steamship1. Where a steamship and a sailing vessel

are approaching each other from oppo-site directions, or on intersecting lines, the steamship from the moment the sail-ing vessel is seen, shall watch with the highest diligence her course and move-ments so as to be able to adopt such timely means of precaution as will neces-sarily prevent the two boats from coming in contact.

2. The sailing vessel is required to keep her course unless the circumstances require otherwise.

Zones of Time in the Collision of Vessels1. First zone – all time up to the moment

when risk of collision begins.☞ No rule is as yet applicable for none is nec-essary.2. Second zone – time between moment

when risk of collision begins and moment it becomes a practical certainty.

☞ It is in this period where conduct of the vessels is primordial. It is in this zone that vessels must strictly observe nautical rules, unless a departure therefrom becomes neces-sary to avoid imminent danger.3. Third zone – time when collision is certain

and time of impact. ☞ An error in this zone would no longer be legally consequential.✍ Error in Extremis - sudden movement made by a faultless vessel during the third zone of collision with another vessel which is at fault during the 2nd zone. Even if such sudden movement is wrong, no responsibility will fall on said faultless vessel. (Urrutia and Co. v. Baco River Plantation Co., 26 PHIL 632)

Cases Covered By Collision and Allision1. One vessel at fault☞ Vessel at fault is liable for damage caused to innocent vessel as well as damages suf-fered by the owners of cargo of both vessels. (Art. 826)2. Both vessels at fault ☞ Each vessel must bear its own loss, but the shippers of both vessels may go against the shipowners who will be solidarily liable. (Art. 827)3. Vessel at fault not known ☞ Each vessel must bear its own loss, but the shippers of both vessels may go against the shipowners who will be solidarily liable. (Art. 828)

✍ Doctrine of Inscrutable Fault – In case of collision where it cannot be deter-mined which between the two vessels was at fault, both vessels bear their re-spective damage, but both should be sol-idarily liable for damage to the cargo of both vessels.

4. Third vessel at fault☞ The third vessel will be liable for losses and damages. (Art. 831)

5. Fortuitous event/force majeure☞ No liability. Each bears its own loss. (Art. 830)

✍ The doctrine of res ipsa loquitur applies in case a moving vessel strikes a stationary ob-ject, such as a bridge post, dock, or naviga-tional aid. (Far Eastern Shipping v. CA, Luzon Stevedoring vs. CA)

✍ Even if the cause of action against the com-mon carrier is based on quasi-delict, the de-fense of due diligence in the selection and su-pervision of employees is unavailing in case of a maritime tort resulting in collision. It is not a civil tort governed by the Civil Code but a maritime one governed by Arts. 826-839 of the Code of Commerce. (Manila Steamship vs. Insa Abdulhaman)

✍ Doctrine of Last Clear Chance and Rule on Contributory Negligence cannot be applied in collision cases because of Art.827 of the Code of Commerce. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed.)

MARITIME PROTEST☞ Condition precedent or prerequisite to re-covery of damages arising from collisions and other maritime accidents.☞ It is a written statement made under oath by the captain of a vessel after the occur-rence of an accident or disaster in which the vessel or cargo is lost or damaged, with re-spect to the circumstances attending such oc-currence, for the purpose of recovering losses and damages. ✍ Excuses for not filing protest: 1) where the interested person is not on board the vessel; and 2) on collision time, need not be protested. (Art. 836)☞ Cases applicable:

1. Collision (Art. 835); 2. Arrival under stress (Art. 612(8)); 3. Shipwrecks (Arts. 612(15), 843); 4. Where the vessel has gone through

a hurricane or when the captain be-lieves that the cargo has suffered damages or averages (Art. 624).

☞ Who makes: Captain☞ When made: within 24 hours from the time the collision took place.☞ Before whom made: competent authority at the point of collision or at the first port of arrival, if in the Philippines and to the Philip-pine consul, if the collision took place abroad. (Art. 835)

SHIPWRECK☞ It is the loss of the vessel at sea as a con-sequence of its grounding, or running against an object in sea or on the coast. It occurs when the vessel sustains injuries due to a ma-rine peril rendering her incapable of naviga-tion.✍ If the wreck was due to malice, negligence or lack of skill of the captain, the owner of the vessel may demand indemnity from said cap-tain. (Art. 841)




✍ The rules on collision or allision, as may be pertinent, can equally apply to shipwrecks.

SPECIAL CONCEPTSARRASTRE SERVICE☞ A contract for the unloading of goods from a vessel.☞ Applicability: Overseas trade only. (Com-mercial Law Review, C. Villanueva, 2004 ed.)☞ Significance: When a person brings in cargo from abroad, he cannot unload and de-liver the cargo by himself. The unloading must be done by the arrastre operator, which will then deliver the cargo to the importer. (Commercial Law Review, C. Villanueva, 2004 ed.)☞ Nature of business: It is a public utility, dis-charging functions which are heavily invested with public interest.☞ Liability:1. Similar to a warehouseman (Lua Kian v.

Manila Railroad)2. Similar to a common carrier (Northern

Motors v. Prince Line) 3. Solidary liability with the common carrier

Note: In order that the arrastre operator may be held liable, the consignee must prove that the damage was due to the negligence and while the goods are in the custody of the ar-rastre operator. (Hartford Fire Insurance v. E. Razon, Inc.)

STEVEDORING SERVICE☞ The carriage of goods from the warehouse or pier to the holds of the vessel. (Chief of Staff vs. CIR)☞ As understood in the port business, the term consists of the handling of cargo from the hold of the ship to the dock, in case of pier-side unloading; or to a barge, in case of unloading at sea. (Anglo-Fil Trading Corp. vs. Lazaro)✍ The loading on the ship of outgoing cargo is also part of stevedoring work. (Ibid.)

CONTAINERIZATION/ “SAID-TO-CONTAIN”/ “SHIPPER’S LOAD AND COUNT” SYSTEM☞ System whereby the shipper loads his car-goes in a specially designed container, seals the container and delivers it to the carrier for transportation. The carrier does not partici-pate in the counting of the merchandise for loading into the container, the actual loading, and the sealing of the container. (US Lines v. Comm. Of Customs, ICTSI v. Prudential Guar-antee)✍ The matter of quantity, description and conditions of the cargo inside the container is the sole responsibility of the shipper, unless there is stipulation to the contrary. (US Lines vs. Comm. Of Customs, Reyma Brokerage v. Phil. Home Assurance)

Note: In order to attribute to the carrier any damage to the shipment that may be found, inspection of the goods should be done at pier-side. (Bankers vs. CA) III. CARRIAGE OF GOODS BY SEA ACT/COGSA

(C.A. No. 65)

APPLICABILITY ☞ The transportation must be:

1. Water/maritime transportation;2. for the carriage of goods; and3. overseas/international/foreign (from

foreign port to Philippine port). ✍ It can be applied in domestic sea trans-portation if agreed upon by the parties. (Clause paramount or paramount clause)

IMPORTANT FEATURES:1. Amount of carrier’s liability2. Notice of damage3. Prescriptive period

AMOUNT OF CARRIER’S LIABILITY☞ Under the Sec. 4(5), the liability limit is set at $500 per package or customary freight unit unless the nature and value of such goods is declared by the shipper. This is deemed in-corporated in the bill of lading even if not mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA 463)✍ Note that Art. 1749, NCC applies to domes-tic/inter-island/coastwise trade.

NOTICE OF DAMAGE (SEC. 3(6))☞ Rules:a. Patent damage: shipper should file a

claim with the carrier immediately upon delivery

b. Latent damage: shipper should file a claim with the carrier within three days from delivery.

Note: The filing of a notice of claim is not a condition precedent.

PRESCRIPTIVE PERIOD☞ Action for loss or damage to the cargo should be brought within one year after:

a. Delivery of the goods (delivered but damaged goods); or

b. The date when the goods should have been delivered (non-delivery). (Sec. 3[6])

“Loss or Damage” as applied to the COGSA contemplates a situation where no delivery at all was made by the shipper of the goods be-cause the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered. Thus, it is inapplicable in case of misdelivery or conversion. (Ang vs. American Steamship Agencies Inc.) and damage arising from delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA). In such instance the, Civil Code rules on prescription shall apply.

✍ The one-year prescriptive period is sus-pended by:

1. The express agreement of the par-ties (Universal Shipping Lines, Inc. vs. IAC, 188 SCRA 170)

2. The filing of an action in court until it is dismissed. (Stevens & Co. vs. Nordeutscher Lloyd, 6 SCRA 180)




✍ The one-year period shall run from delivery of the last package and is not suspended by extrajudicial demand. (Dole Phils.,Inc. vs. Maritime Co.,148 SCRA 118)

✍ The one-year period shall run from delivery to the arrastre operator and not to the con-signee. (Union Carbide Phils, Inc. vs. Manila Railroad Co.,SCRA 359)

✍ The insurer exercising its right of subroga-tion is bound by the one-year prescriptive pe-riod. However, it does not apply to the claim against the insurer for the insurance pro-ceeds. (Fil. Merchants Ins. Co. vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)

IV. WARSAW CONVENTION OF 1929 (WC)

PURPOSE: To protect the emerging air trans-portation industry and to secure the unifor-mity of recovery by the passengers.APPLICABILITY☞ The transportation must be:

1. International transportation;2. Air transportation; and3. Carriage of passengers, baggage or

goods.✍ The WC shall also apply to fortuitous trans-portation by aircraft performed by an air transportation enterprise.

✍ International transportation - any trans-portation in which the place of departure and the place of destination are situated either:

1. Within the territories of two High Con-tracting Parties regardless of whether or not there be a break in the transportation or transshipment, or 2. Within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though that power is not a party to the Convention. (“round trip”, Am. Jur.)

✍ Transportation to be performed by several successive air carriers shall be deemed to be one undivided transportation, if it has been regarded by the parties as a single operation, whether it has been agreed upon under the form of a single contract or of a series of con-tracts, and it shall not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting Party. (Art. 1 Sec.3)

WHEN INAPPLICABLE1. When public policy is contradicted;2. If the requirements under the Con-

vention are not complied with.

IMPORTANT CONCEPTS:1. Transportation documents

a. Passenger ticketb. Baggage check

c. Air way bill2. Liability of the carrier for damages

a. Death or injury to passengersb. Loss or damage to baggage or

goodsc. Delay

3. Successive carrier agreement4. Jurisdiction5. Combined transportation agreement

PASSENGER TICKET BAGGAGE CHECK AIR WAYBILL

Checked-in baggage Goods to be shipped

LIABILITY OF CARRIER FOR DAMAGES1. Death or injury of a passenger if the acci-dent causing it took place on board the air-craft or in the course of its operations of em-barking or disembarking; (Art. 17)2. Destruction, loss or damage to any bag-gage or goods, if it took place during the “transportation by air”; (Art. 18) and✍ Transportation by air – The period during which the baggage or goods are in the charge of the carrier, whether in an airport or on board an aircraft, or, in case of a landing out-side an airport, in any place whatsoever.

It includes any transportation by land or water outside an airport if such takes place in the performance of a contract for transporta-tion by air, for the purpose of loading, deliv-ery, or transshipment.3. Delay in the transportation of passengers, baggage or goods. (Art. 19)

Note: The Hague Protocol amended the WC by removing the provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely (Art. 20(1)). (Alitalia vs. IAC, 192 SCRA 9)

LIMIT OF LIABILITY (Art. 22, as amended by Guatemala Protocol, 1971; Alitalia vs. IAC)1. Passengers ☑GENERAL RULE: $100,000 per passenger☑EXCEPTION: Agreement to a higher limit

2. Checked-in baggage☑GENERAL RULE: $20 per kilogram☑EXCEPTION: In case of special declaration of value and payment of a supplementary sum by consignor, carrier is liable to not more than the declared sum unless it proves the sum is greater than actual value.3. Hand-carried baggage☞ $1000/passenger4. Goods to be shipped☑GENERAL RULE: $20 per kilogram☑EXCEPTION: In case of special declaration of value and payment of a supplementary sum by consignor, carrier is liable to not more than the declared sum unless it proves the sum is greater than actual value.




✍ An agreement relieving the carrier from lia-bility or fixing a lower limit is null and void. (Art. 23)✍ Carrier is not entitled to the foregoing limit if the damage is caused by willful misconduct or default on its part. (Art. 25)

✍ Thus, the WC does not operate as an exclu-sive enumeration of the instances of an abso-lute limit of the extent of liability. It does not preclude the application of the Civil Code and other pertinent local laws. It does not regu-late or exclude liability for other breaches of contract by the carrier, or misconduct of its employees, or for some particular or excep-tional type of damage. (Alitalia vs. CA)

In PanAm v. IAC, the WC was applied as re-gards the limitation on the carrier’s liability, there being a simple loss of baggage without any improper conduct on the part of the offi-cials or employees of the airline or other spe-cial injury sustained by the passenger.

✍ In KLM Royal v. Tuller, the WC has invari-ably been held inapplicable, or as not restric-tive of the carrier’s liability, where there was satisfactory evidence of malice or bad faith attributable to its officers and employees. (Al-italia vs. IAC)

ACTION FOR DAMAGES1. Notice of claim☞ A written complaint must me made within:

a. 3 days from receipt of baggageb. 7 days from receipt of goodsc. In case of delay, 14 days from re-

ceipt of baggage/goods ✍ The complaint is a condition precedent. Without the complaint, the action is barred except in case of fraud on the part of the car-rier. (Art. 26)

2. Prescriptive period ☞ Action must be filed within 2 years from:

a. date of arrival at the destinationb. date of expected arrivalc. date on which the transportation

stopped. (Art. 29)

✍ In United Airlines vs. Uy the two-year pre-scriptive period was not applied where the airline employed delaying tactics.

RULE IN CASE OF VARIOUS SUCCESSIVE CAR-RIERS1. Carriage of passengers ☑GENERAL RULE: Action is filed only against the carrier in which the accident or delay oc-curred. ☑EXCEPTION: Agreement or contract whereby the first carrier assumed liability for the whole journey. 2. Carriage of baggage or goods

a. Passenger or consignor can file an action against the first carrier and the carrier in which the damage oc-curred

b. Passenger or consignee can file an action against the last carrier and the carrier in which the damage oc-curred.

✍ These carriers are jointly and severally liable. (Art. 30)

✍ A contract of international carriage by air, although performed by different carriers un-der a series of airline tickets constitutes a sin-gle operation. Members of the International Air Transportation Association (IATA) are un-der a general pool partnership agreement wherein they act as agent of each other in the issuance of tickets to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world. (American Airlines vs. CA)

✍ Under a general pool partnership agree-ment, the ticket-issuing airline is the principal in a contract of carriage while the endorsee-airline is the agent. The obligation of the for-mer remained and did not cease even when the breach occurred not on its own flight but on that of another airline which had under-taken to carry the passengers to one of their destinations. (China Airlines vs. Chiok)

JURISDICTION☞ At the option of the plaintiff, the action for damages may be filed in the:

a. Court of domicile of the carrier;b. Court of its principal place of busi-

ness;c. Court where it has a place of busi-

ness through which the contract has been made; or

d. Court of the place of destination. (Art. 28(1))

NOTE: It is the passenger’s “ultimate destina-tion” not “an agreed stopping place” that de-termines the country where suit is to be filed.✍ The forum of action provided in Art. 28(1) is a matter of jurisdiction rather than of venue. (Santos III vs. Northwest; 2A C.J.S.)

V. SALVAGE LAW (Act No. 2616)

SALVAGE☞ Two concepts:1. Services one person renders to the owner of a ship or goods, by his own labor, preserv-ing the goods or the ship which the owner or those entrusted with the care of them have either abandoned in distress at sea, or are unable to protect or secure.2. Compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been saved in whole or in part from impending sea peril, or such property recovered from actual peril or loss, as in cases of shipwreck, derelict or recap-ture.☞ Requisites:

1. Valid object of salvage;




2. Object must have been exposed to marine peril (not perils of the ship);

3. Services rendered voluntarily (nei-ther an existing duty nor out of a pre-existing contract);

4. Services are successful, total or partial.

☞ Subjects of Salvage:1. Ship itself;2. Jetsam – goods which are cast into the sea, and there sink and remain under water;3. Floatsam or Flotsam – goods which float upon the sea when cast overboard;4. Ligan or Lagan – goods cast into the sea tied to a buoy, so that they may be found again by the owners (p.173, Judge Diaz).☞ Persons who have no right to a reward for salvage:1. Crew of the vessel saved;2. Person who commenced Salvage in spite of opposition of the Captain or his representa-tive; 3. In accordance with Sec. 3 of the Salvage Law, a person who fails to deliver a salvaged vessel or cargo to the Collector of Customs.

✍ Derelict – a ship or her cargo which is aban-doned and deserted at sea by those who are in charge of it, without any hope of recover-ing it, or without any intention of returning to it.

✍ The intention of those in charge must be ascertained. If those in charge left with the in-tention of returning, or of procuring assis-tance, the property is not derelict, but if they quitted the property with the intention of fi-nally leaving it, it is derelict and a change of their intention and an attempt to return will not change its nature (Erlanger & Galinger vs. Swedish East Asiatic Co. Ltd.).

✍ If it is clear that the intention to return is slight, the salvage which was done thereafter is considered valid. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p. 616)

CONTRACT OF TOWAGE☞ A contract whereby one vessel, usually mo-torized, pulls another, whether loaded or not with merchandise, from one place to another, for a compensation. It is a contract for ser-vices rather than a contract of carriage.

SALVAGE TOWAGE

Governed by special law (Act No. 2616)

Governed by Civil Code on contract of lease

Requires success, otherwise no pay-ment

Success is not re-quired

Must be done with the consent of the

Only the consent of the tugboat owner is

captain/crewmen needed

Vessel must be in-volved in an acci-dent

Vessel need not be involved in an acci-dent

Fees distributed among crewmen

Fees belong to the tugboat owner

RULES ON SALVAGE REWARD1. The reward is fixed by the RTC judge in

the absence of agreement or where the latter is excessive. (Sec. 9)

2. The reward should constitute a suffi-cient compensation for the outlay and effort of the salvors and should be lib-eral enough to offer an inducement to others to render services in similar emergencies in the future.

3. If sold (no claim being made within 3 months from publication), the proceeds, after deducting expenses and the sal-vage claim, shall go to the owner; if the latter does not claim it within 3 years, 50% of the said proceeds shall go to the salvors, who shall divide it equitably, and the other half to the government. (Secs. 11-12)

4. If a vessel is the salvor, the reward shall be distributed as follows:

a. 50% to the shipowner;b. 25% to the captain; and

c. 25% to the officers and crew in pro-portion to their salaries. (Sec. 13)

✍ Taking passengers from a sinking ship, without rendering any service in rescuing the vessel, is not a salvage service, being a duty of humanity and not for reward.

VI. PUBLIC SERVICE ACT(C.A. No. 146)

PURPOSES:1. To secure adequate, sustained ser-

vice for the public at the least pos-sible cost;

2. To protect the public against unrea-sonable charges and poor, ineffi-cient service;

3. To protect and secure investments in public services;

4. To prevent ruinous competition.

AUTHORITY TO OPERATE PUBLIC SERVICES☑GENERAL RULE: No public service shall op-erate without having been issued a certificate of public convenience or a certificate of public convenience and necessity.☑EXCEPTIONS:

1. Warehouses;2. Animal drawn vehicles and bancas

moved by oar or sail;3. Airships, except for the fixing of

maximum rates for fare and freight;4. Radio companies, except for rates




fixing;5. Public services owned or operated

by the government, except as to rates fixing;

6. Ice plants; and7. Public markets.

PUBLIC SERVICE☞ A person who owns, operates, manages or controls in the Philippines for hire or compen-sation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier or public utility, ice plants, power and water supplies, communication and similar public services. (Sec. 13b, CA 146)✍ A casual or incidental service devoid of public character and interest is not brought within the category. The question depends on such factors as the extent of services, whether such person or company has held himself or itself out as ready to serve the public or a portion of the public generally. (Luzon Stevedoring vs. PSC)

NOTE: The Public Service Commission created under the Public Service Law has already been abolished under P.D. No. 1 and other is-suances. It has been replaced by the follow-ing government agencies: LTO; LTFRB; ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and MIA.

CERTIFICATE OF PUBLIC CONVE-NIENCE (CPC)

CERTIFICATE OF PUBLIC CONVE-NIENCE AND NECES-SITY (CPCN)

An authorization is-sued by the appro-priate government agency for the oper-ation of public ser-vices for which no franchise, either mu-nicipal or legislative, is required by law, e.g., common carri-ers.

An authorization is-sued by the appro-priate government agency for the oper-ation of public ser-vice for which a prior franchise is required by law; e.g. tele-phone and other ser-vices.

✍ A CPC or a CPCN constitutes neither a fran-chise nor a contract, confers no property right, and is a mere license or a privilege. The holder of said certificate does not acquire a property right in the route covered thereby. Nor does it confer upon the holder any propri-etary right or interest or franchise in the pub-lic highways. Revocation of this certificate de-prives him of no vested right. New and addi-tional burdens, alteration of the certificate, or even revocation or annulment thereof is re-served to the State. (Luque vs. Villegas, 30 SCRA 408)

✍ It is a “property” and has a considerable value and can be the subject of sale or at-

tachment. (Cogeo-Cubao Operators and Driv-ers Assn. vs. CA, 207 SCRA 343, Raymundo vs. Luneta Motor Co.)

REQUREMENTS FOR GRANTING CPC OR CPCN1. Applicant must be a citizen of the Philip-

pines or a corporation or entity 60% of the capital of which is owned by such citizens;

2. Applicant must prove public necessity;3. Applicant must prove that the operation

of the public service proposed and the authorization to do business will pro-mote the public interest on a proper and suitable manner;

4. Applicant must have sufficient financial capability to undertake the proposed services and meeting the responsibili-ties incident to its operation.

POWERS REQUIR-ING PRIOR NOTICE

AND HEARING

POWERS EXERCIS-ABLE WITHOUT

PRIOR NOTICE AND HEARING

1. Issuance of CPC or CPCN;

2. Fixing of rates, tolls, and charges;

3. Setting up of standards and classifications;

4. Establishment of rules to se-cure accuracy of all meters and all mea-suring appli-ances;

5. Issuance of or-ders requiring establishment or mainte-nance of ex-tension of fa-cilities;

6. Revocation, or modification of CPC or CPCN;

7. Suspension of CPC or CPCN, ex-cept when it is nec-essary to avoid seri-ous and irreparable damage or inconve-nience to the public or private interest, in which case, a suspension not more than 30 days may be ordered, prior to the hearing. (Soriano v. Medina, 164 SCRA 36)

1. Investigation any matter concerning public service;

2. Requiring oper-ators to furnish safe, adequate, and proper ser-vice;

3. Requiring pub-lic services to pay expenses of investiga-tion;

4. Valuation of properties of public utilities;

5. Examination and test of measuring ap-pliances;

6. Grant of special permits to make extra or special trips in territories spec-ified in the cer-tificate;

7. Uniform ac-counting sys-tem and fur-nishing of an-nual reports;

8. Compelling compliance with the laws and regula-tions.




UNLAWFUL ACTS OF PUBLIC UTILITY COMPA-NIES1. Engagement in public service business

without first securing the proper certifi-cate;

2. Providing or maintaining unsafe, im-proper or inadequate service as deter-mined by the proper authority;

3. Committing any act of unreasonable and unjust preferential treatment to any particular person, corporation or entity as determined by the proper authority;

4. Refusing or neglecting to carry public mail upon request. (Secs. 18 and 19)

ACTS REQUIRING PRIOR APPROVAL1. Establish and maintain individual or

joint rates;2. Establish and operate new units;3. Issue free tickets;4. Issue any stock or stock certificates rep-

resenting an increase of capital;5. Capitalize any franchise in excess of the

amount actually paid to the Govern-ment;

6. Sell, alienate, mortgage or lease prop-erty, certificates or franchise.

✍ Under Sec. 20(g) of C.A. No. 146, the sale, etc. may be negotiated and completed before the approval by the proper authority. Its ap-proval is not a condition precedent to the va-lidity of the contract. The approval is neces-sary only to protect public interest.

PRIOR OPERATOR/OLD OPERATOR RULE☞ The rule allowing an existing franchised op-erator to invoke a preferential right within the authorized territory as long as he renders sat-isfactory and economical service. ☞ The policy is not to issue a certificate to a second operator to cover the same field and in competition with a first operator who is rendering sufficient, adequate and satisfac-tory service. The prior operator must first be given an opportunity to improve its service, if inadequate or deficient.☞ Purpose: To prevent ruinous and wasteful competition in order that the interests of the public would be conserved and preserved.

✍ It subordinates the prior applicant rule which gives the first applicant priority only if things and circumstances are equal.

✍ Where the operator either fails or neglects to make the improvement or effect the in-crease in services, especially when given the opportunity, new operators should be given the chance to give the services needed by the public.

PRIOR APPLICANT RULE☞ Presupposes a situation when two inter-ested persons apply for a certificate to oper-ate a public utility in the same community over which no person has as yet granted any certificate. If it turns out, after the hearing,

that the circumstances between the two ap-plicants are more or less equal, then the ap-plicant who applied ahead of the other, will be granted the certificate.

RATE-FIXING POWER☞ The rate to be fixed must be just, founded upon conditions which are fair and reasonable to both the owner and the public.☞ A rate is just and reasonable if it conforms to the following requirements:

1. One which yields to the carrier a fair return upon the value of the property employed in performing the service; and

2. One which is fair to the public for the service rendered.

REGISTERED OWNER RULE☞ The registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by third per-sons caused by the operation of said vehicle, even though the same had been transferred to a third person. The registered owner is not allowed to es-cape responsibility by proving that a third person is the actual and real owner Reason: It would be easy for him, by collusion with oth-ers or otherwise, to transfer the responsibility to an indefinite person, or to one who pos-sesses no property with which to respond fi-nancially for the damage or injury done. (Erezo, et al. vs. Jepte 102 Phil 103).

KABIT SYSTEM☞ A system whereby a person who has been granted a certificate of public convenience al-lows other persons who own motor vehicles to operate under such license, for a fee or percentage of such earnings. It is void and in-existent under Art. 1409, Civil Code. ☞ Effects:1. The transfer, sale, lease or assignment

of the privilege granted is valid between the contracting parties but not upon the public or third persons. (Gelisan vs. Al-day, 154 SCRA 388)




2. The registered owner is primarily liable for all the consequences flowing from the operations of the carrier.

✍ The public has the right to assume that the registered owner is the actual or law-ful owner thereof. It would be very diffi-cult and often impossible, as a practical matter, for the public to enforce their rights of action that they may have for in-juries inflicted by the vehicle if they should be required to prove who the ac-tual owner is. (Benedicto vs. IAC, 187 SCRA 547)

3. The thrust of the law in enjoining the kabit system is to identify the person upon whom responsibility may be fixed with the end in view of protecting the riding public (Lim vs. CA 373 SCRA 394).

4. The registered owner cannot recover from the actual owner and the latter cannot obtain transfer of the vehicle to himself, both being in pari delicto. (Teja Marketing vs. IAC)

5. For the better protection of the public, both the registered owner and the ac-tual owner are jointly and severally li-able with the driver. (Zamboanga Trans-portation Co. vs. CA)


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